Posts tagged ‘Russia’

In the event of Brexit there could be long-term consequences for UK-Russia energy links, if the UK’s policy on sanctions against Russia changes to reflect its vocal opposition to the current Russian government, and close relationship with the US.

“There is a good chance the UK would eventually toughen sanctions against Russia, if and when a deal to leave the EU is finalized,” Paul Sheldon at Platts Analytics said. Currently the UK is a participant in EU sanctions against Russia introduced gradually since 2014 in response to Russia’s role in the conflict in Ukraine. These include restrictions on Russian oil and gas companies’ access to long-term financing and technology used in offshore Arctic, shale and deep-water oil production.

Get used to more scary oil market volatility in 2019. This is the message coming from leading industry strategists and forecasters after a bruising end to last year, when Brent crude dipped below $50/b.

Although the benchmark has recovered along with major global stock markets, forecasters are concerned about the prospects of a sustained rebound. Unpredictable geopolitical upheavals like Brexit and US President Donald Trump’s trade wars are expected to weigh more heavily on sentiment than the fundamentals of supply and demand.

Russia’s recent win at the World Trade Organization against the EU’s efforts to diversify its gas supplies has come too late to stop Eastern Europe gaining access to non-Russian supplies, even if the EU loses its appeal against it.

The EU will likely have time to adopt a fourth “projects of common interest” list, due in late 2019, before any final WTO ruling requiring it to change its selection rules becomes binding.

While politics have always played an important role in the energy sector, over the past few years a trend toward a new class of energy-related decision-making seems to have emerged, with non-economic or sub-economic policies increasingly in evidence.

The recent application of retaliatory tariffs of 25% on US corn by both the EU and China is likely to reduce exports from the US to these countries sharply. One potential beneficiary of this is Ukraine, a major corn exporter on the Black Sea. However, lack of clarity on the duration of the tariffs and whether they might suddenly rise or fall creates uncertainty over whether Black Sea exporters will benefit.

Azerbaijan has long been seen as a strategic gateway to vast oil and gas resources in the Caspian region and a source of energy security for Europe but has yet to live up to its promise as a bulwark against the influence of Russia and OPEC in the region.

Global oil demand growth was a much heralded sidekick to supply cuts that rebalanced the market in record time. Now the Saudi Arabia-Russia pronged pact is considering reversing course on its output cut deal, while demand growth shows little sign of letting up.

That risks leaving a hole in the market that the OPEC alliance will struggle to plug.

Flows via its 55 Bcm/year Nord Stream 1 pipeline to Germany hit a record high of 51 Bcm in 2017, helped by increased access to the onshore OPAL gas pipeline, at first just in January and then continuously from August.

Countries lacking abundant energy resources are often the most effective in ensuring reliable supplies, usually through a mix of pragmatism and openness to foreign investment. But this becomes ever more difficult at a time of rising political tension.

The latest Russian poisoning scandal has highlighted not so much the UK or Europe’s dependence on Russia for energy, but the extent to which energy supply in much of Europe is highly diversified, with multiple sources, delivery methods and intermediaries making it difficult for countries or leaders to intervene for political ends either on the supply or the demand side.